County Court Judgments (CCJs) are added to people’s credit records, so why shouldn’t the same be done for Liability Orders (LOs) for council tax arrears?
This is a really bad idea, involving major problems and costs for local authorities and magistrates courts. These would massively outweigh the potential benefits.
Magistrates Court Liability Order processes are not comparable to County Court processes
The Magistrates Courts procedures for Liability Orders have been described as a rubber-stamping process. For example:
- There is no equivalent of the Debt Pre Action Protocol.
- There is no means of admitting part of the claim.
- The alleged debtor gets little notice of a court hearing and cannot ask for it to be rescheduled to a time they can make or for it to be transferred to a local court if they have moved.
- Magistrates Courts are not geared up to hold hearings at all – it is common for a council to list over a thousand cases on a day.
- There is no equivalent to the County Court set aside procedure if someone comes back from holiday to find they have been given a LO, or that they were given a LO at a previous address some months ago.
The Ministry of Justice is sufficiently concerned about default CCJs to have started consulting on how the resulting credit record problem can be resolved. But CCJs already have a wide range of checks and balances which are entirely absent from LOs; the credit record problems resulting from LOs would be significantly worse.
To remedy these issues, there would have to be huge changes to the Magistrates Courts systems, involving new forms, new procedures and a significant amount of additional court time. A very large number of the people affected are likely to qualify for fee remission so it is hard to see how cost recovery could work.
Poor procedures by local authorities
Some common issues include:
- Councils go to court massively quicker than a commercial creditor does and make no effort to trace anyone who appears to have moved house.
- Failure to take account of benefits issues – this has always been a major problem and it reaches epidemic proportions when an area is moved onto Universal Credit;
- Incorrect charging after someone has left the property;
- Allocation of a payment to the wrong council tax year;
- Not taking into account a young adult who is in full-time education or is a student;
- Landlords of Houses in Multiple Occupation incorrectly saying that the tenants should be liable to pay council tax.
To correct these would require a major overhaul in council procedures. At the moment when there is an error, the council just agrees that that money isn’t owed and calls off the bailiffs if they have been instructed. If a Liability Order had been registered, that would then have to be deleted.
A completely new procedure would have to be set up for councils to record when Liability Orders are paid within a month so they can be deleted from the register. This would also have to take account of the very common situation where the amount of the Liability order is wrong and it takes months to get this resolved, at which point it is paid in full.
Registering a Liability Order may make it significantly harder for people to obtain a private tenancy, resulting in additional costs for councils for temporary accommodation, children moving between schools, mental health services etc.
The potential benefits
I have heard various benefits mentioned:
- “can pays” will pay their bills more promptly so would cost the council less. I do not believe this would be significant. The idea that there are lots of people who would rather deal with council tax bailiffs than default on a credit card doesn’t make sense.
There was an experiment by Nottingham Council when it trialled putting warnings about credit records in its letters and found a reduction in LOs. But ignoring the ethics of lying to your residents (!) there is the problem that I am told they also did a media campaign before and during the experiment – which effectively renders the results worthless.
- councils would get access to real-time data. That isn’t worth anything unless the data is of any use.
- councils would be able to more clearly distinguish “can’t pays” from “won’t pays”. I have no idea how this is supposed to work. Just because someone has CCJs doesn’t mean they can’t pay their council tax and the absence of CCJs says nothing about whether they can. If a council wants to find out if a resident can afford the council tax bill, they need to join the other creditors in 2018 and start asking for a Standard Finanical Statement.
- people who pay their council tax on time will benefit from better credit scores. This one is wrong if only Liability Orders are being added to a credit record. It would require council tax monthly payments to be added to credit records – a much larger project.
- lenders would give people without LOs better credit terms. There is no shortage of available credit in the UK for people without affordability problems. There seems no reason to think that someone without problems would be able to get easier or cheaper credit if LOs were registered.
- it would improve lenders’ affordability assessments. Well to some extent, any more data is good. But there are a lot better ways to improve affordability assessments than adding LOs.
At the moment the whole Liability Order process is fraught with problems. To a large extent, these are ignored and the underlying issue of the alleged council tax arrears is resolved. But if LOs are going to be added to credit records, it would require a large and expensive change of processes by councils and courts. It is very hard to see how the costs of this could possibly be outweighed by any small benefits.